Medium Term Renewable Energy Market Report 2016

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1 Medium Term Renewable Energy Market Report 2016 Clean Energy Investment and Trends IETA Pavilion COP22, Marrakech November 10, 2016 Liwayway Adkins Environment and Climate Change Unit International Energy Agency

2 The IEA works around the world to support an accelerated clean energy transition that is enabled by real-world SOLUTIONS supported by ANALYSIS and built on DATA

3 Context A year of records for renewable electricity Total capacity has now overtaken coal A record amount of new capacity was installed in 2015 COP21 Paris Agreement gives momentum to renewables Local air pollution & energy security are also key drivers Energy investment flows confirm shift to renewables But policy makers need to heighten their commitments and provide investors more clarity & certainty

4 Net additions (GW) New policies underpin a more bullish forecast for renewables Renewable electricity capacity growth (GW) in MTRMR s main case % Others Brazil India China Japan United States MTRMR 2015 Forecast MTRMR 2016 Forecast EU28 China remains key growth market for renewable capacity, while the United States surpasses the EU for the first time

5 Annual additions (GW) Wind and solar PV compensate for slower hydropower growth Renewable electricity capacity additions by technology ( ) US PTC boom China FiT reduction boom Italy PV boom Hydropower Wind Solar Other renewables Japan PV bust Predicting policy-driven boom and bust cycles remains a challenge, which is expected to continue over the medium-term.

Other renewables Solar PV & wind account for almost 2/3 of rise in renewables

6 Wind and solar PV compensate for slower hydropower growth Renewable electricity generation by source % 4% 8% 15% 71% Hydropower Bioenergy Wind Solar PV Other renewables Solar PV & wind account for almost 2/3 of rise in renewables generation; total renewable electricity overpasses 7600 TWh by 2021, equivalent to EU+US today

7 USD 2015/MWh Renewable costs reductions to remain an important driver for future growth 400 Weighted average generation costs for solar PV and wind Onshore wind Offshore wind Solar PV - utility scale Utility-scale solar PV generation costs to fall by another quarter and onshore wind by 15% over , largest absolute cost reduction expected from offshore wind

8 USD/MWh (nominal) Policy transition from government-set tariffs to policy-driven auctions/tenders Jordan Recent announced long-term contract prices for new renewable power to be commissioned over India India Denmark South Africa South Africa Uruguay Chile Canada Brazil Brazil Brazil US UAE Germany France Jordan Australia South Africa Brazil Germany US South Africa Egypt Morocco Netherlands India Chile Peru Mexico Peru UAE Chile Solar PV Onshore wind Offshore wind Best results occur where price competition, long-term contracts and good resource availability are combined

9 GW Demand and diversification drive growth in Middle East & Africa Net additions to capacity (GW) x3 +60 % Accelerated Hydropower Solar PV Wind Others Non-hydro pace dictated by auction schedules and grid integration; faster growth possible with quicker implementation and more access to low-cost financing

10 Decentralised renewables could improve electricity access and reliability Share of population with access to electricity: More than 50% Less than 50% No information Nigeria 100 million without access Ethiopia 75 million without access Urban 38% Urban 4% Rural 62% Rural 96% Sub-Saharan Africa requires electrification solutions tailored to population density. Affordable small-scale solar PV can help access in rural areas and improve reliability in urban zones.

11 2001=100 Renewables to remain fastest growing source of electricity generation Indexed electricity generation by fuel ( ) Global power generation Coal Natural gas Renewable electricity generation Generation from renewables to rise by almost two-fifths over , pushing their share of total electricity generation from 23% to 28%

12 TWh A two-speed world for renewable electricity Electricity and renewable generation growth by country/region China India ASEAN Africa EU28 United States Japan Electricity generation growth ( ) Renewable generation growth ( ) Source: Total electricity generation from World Energy Outlook 2016, forthcoming. The increase in generation from renewables in represents 60% of the global increase in electricity output, but prospects vary across regionally

13 2030 INDC target = 100 Medium-term renewable power forecast in line with COP21 goals Renewable electricity generation indexed to INDC targets Global 2 C target in 2030 INDC renewable generation targets in 2030 World United States EU28 Japan China India Others Renewable generation in 2015 Renewable generation in 2021 But even more is needed to meet the ambitious climate targets agreed at COP21

14 GW More ambitious policies could further enhance the outlook in line 2 C target Renewable electricity capacity additions in Accelerated Case vs. Main Case Main case Accelerated case Renewables are in line with NDC pledges by 2030 but reducing policy uncertainty and overcoming financing & grid integration challenges remain key to achieve 2 C target

15 Renewables to dominate electricity growth, but less progress in heat and transport Share of renewables in sector demand Share of renewables in electricity, heat and transport sectors 30% 25% 20% 15% 10% 5% 0% Renewable electricity Renewable heat Biofuels in road transport The share of renewables rises in all sectors, despite persistent challenges in heat & transport; interactions between energy efficiency & renewables become critical

16 Conclusions Prospects for renewables electricity revised upwards, driven by policy improvements, cost reductions & efforts to improve air quality The impact of lower fossil fuel prices on renewables varies by sector. Wind (onshore) & solar PV are the only technologies on track for a 2 o C scenario Competition in Asia between renewables & coal/gas will be critical to meeting global decarbonisation targets Attracting investment in renewables hinges on appropriate market rules & regulations, particularly in markets with slow electricity demand growth IEA is working to accelerate energy transition with its analysis on policy & technology and system integration of renewables.

17 Any questions?

18 Generation Prices Deployment Africa can leapfrog to growth based on more affordable renewables Policy priorities change over time Initiation Take-off Mainstreaming Predictable and rapidly adaptive incentives Focus on noneconomic barriers Manage total support costs System integration Market design and expose RE to competition Public acceptance International benchmark prices Time Key Objective Policy Priorities Critical Mass Reduce Costs System Integration Clear regulatory framework Secure financial support Cost convergence with international benchmarks Introduce competition Develop flexible energy system Market reform

19 China is the undisputed leader of renewable capacity growth Hydropower Share of China in global renewable capacity growth( ) Wind 36% China 40% China 64% Rest of the world 60% Rest of the world Solar PV 36% China Rest of the world 64% Despite strong growth, grid integration remains an important challenge along with overcapacity in the power sector

20 Annual additions (GW) US multi-year tax credit extension to drive 60% more growth 25.0 United States annual renewable capacity additions Hydropower Bioenergy Onshore wind Offshore wind Solar PV Geothermal CSP MTRMR 2015 ITC and PTC extension to give more policy visibility to wind and solar developers but uncertainty remains for other renewables

21 Annual additions (GW) Slower growth in Europe as policy transition continues 12 Annual renewable additions for France, Germany, Italy and UK France Germany Italy United Kingdom Pending EU legislations concerning 2030 renewable targets, incentive reductions, policy uncertainties at country level and overcapacity remain challenges

22 Solar PV to drive India s forecast but meeting the target remains a challenge India renewable capacity by technology Hydropower Wind Solar PV Bioenergy Cumulative capacity (GW) Financial health of utilities, better state-level implementation of RPOs, faster grid infrastructure expansion and reducing land acquisition barriers remain challenges

23 Capacity growth (GW)) Latin America to take advantage of more affordable solar PV and onshore wind 60 Latin America renewable capacity growth (GW) Hydropower Bioenergy Onshore wind Offshore wind Solar PV Geothermal CSP Diversification needs, energy security concerns and decreasing prices, drive solar and wind expansion in Latin America while large-scale hydropower growth will continue.

Medium- Term Renewable Energy Market Report Heymi Bahar Project Manager Renewable Energy Division International Energy Agency

Medium- Term Renewable Energy Market Report 2016 Heymi Bahar Project Manager Renewable Energy Division International Energy Agency Energy and Mines World Congress, Toronto, 21-22 November 2016 Context